Thinking of expanding their business to include catering

Assignment Help Financial Management
Reference no: EM132040405

Follow the instructions below.

New Project Analysis:

You are the analyst for a Pistol Pete’s Pizza Palace, a restaurant that is thinking of expanding their business to include catering for at least the next three years.

To take on this project, the restaurant would need to purchase a van to transport food to customer locations. The price of the van is $40,000, and there would be a customization expense of $10,000 to modify the van for this special use.

The vehicle would be depreciated using the 3-year MACRS schedule (33%, 45%, 15% and 7%) and be sold at the end of 3 years for $5,000.

This project would increase sales by $25,000 annually and increase food costs by $5,000. There would also be an increase in net operating working capital of $3,000.The restaurant’s current tax rate is 40%, and their WACC is 10%.

Based on the Capital Budgeting Techniques what should the restaurant expand their business to include catering services? Why or why not?

Once you have calculated the cash flows for this project, you will also need to calculate the project’s payback period, discounted payback period, NPV, IRR and MIRR. [provide cash flow statement]

Now assume the restaurant's WACC falls to 7.5% and calculate the NPV, IRR, MIRR, payback period and payback period.

THIS REQUIRES A MINI INCOME STATEMENT AND AN CASH FLOW STATEMENT.

Reference no: EM132040405

Questions Cloud

What amount of income will be recognized in respect : What amount of income will be recognized in respect of the grant in the year to 31 March 2010?
What is the value of firm operations today : Find the horizon value in year 5 for the firm’s constant growth phase. What is the value of firm operations today?
Calculate the current market value of firm equity : Calculate the current market value of firm equity. During the subscription period, what will be the market value of a right?
Weighted average cost of capital for the company : Calculate the Weighted Average Cost of Capital (WACC) for the following company.
Thinking of expanding their business to include catering : You are the analyst for a Pistol Pete’s Pizza Palace, restaurant that is thinking of expanding their business to include catering for at least next three years
What is the firm accounts receivable balance : The inventory balance at the firm is $1,591,000, while its accounts payable balance is $2,068,000. What is the firm’s accounts receivable balance?
How much money will thornton-danaher receive from auction : How much money will Thornton and Danaher receive from the auction? What will your investment bank receive?
A firm with cyclical earnings is characterized : A firm with cyclical earnings is characterized by
Requirements for disclosures of related party transactions : Undertaking “A” owns 30% of undertaking “B” and has significant influence in this undertaking. requirements for disclosures of related party transactions?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd